Grieving parents hit with $200K in student loans years after daughter’s death

Grieving parents hit with $200K in student loans years after daughter’s death

NEW YORK — When his 27-year old daughter Lisa died suddenly of liver failure five years ago, Steve Mason was as devastated as any father would be.

He and his wife Darnelle immediately took in Lisa’s three children — ages 4, 7 and 9 at the time — even though they knew it would be a huge struggle to support them. Steve earns less than $75,000 per year as a pastor, while Darnelle earns even less as a director at the same church.

Then the student loan bills started coming.

Mason had co-signed on the $100,000 in private student loans that his daughter took out for nursing school, and the lenders wanted their money.

Unable to keep up with the monthly payments on top of all of the other mounting expenses, the $100,000 balance ballooned into $200,000 as a result of late penalties and interest rates of as high as 12 percent.

“It’s just impossible on a pastor’s salary raising three kids to pay $2,000 a month on loans,” said Mason, who has been searching for a second job.

If these had been federal student loans, Mason could have had the loans discharged or at least received some sort of financial assistance. But since they are private loans, he has little to no recourse.

He called each lender to explain his situation and beg for help, and while they sympathized with him, they told him they weren’t required to do anything.

And they’re right — private lenders aren’t bound by any federal requirements to help borrowers — or co-signers — facing financial hardship, even when it’s a parent whose child has passed away, says Deanne Loonin, an attorney at the National Consumer Law Center. Any loan forgiveness is up to the discretion of an individual lender.

Navient Corp., which manages several of Mason’s loans, said it has reduced the balance and lowered interest rates and payments for Mason in the past, and provides relief to customers on a case-by-case basis.

“We extend our deepest sympathies to the Mason family on the loss of their daughter,” the company said in a statement to CNNMoney. “We’re reaching out to Mr. Mason to offer further assistance as appropriate.”

After being contacted by CNNMoney, Mason said Navient lowered his interest rate to 0% on three of four loans and reduced the total amount owed to $27,000 from nearly $35,000.

American Education Services, which handles the bulk of Mason’s other loans, said as a loan servicer it’s in charge of collecting payments and doesn’t make the rules about forgiveness. Mason would therefore need to contact the original lender, National Collegiate Trust, directly. He did this, and says the lender refused to provide him with any relief. NCT could not be reached for comment.

Mason has considered declaring bankruptcy, but student loans are the only type of debt that generally can’t be discharged through bankruptcy.

“People with other debt from splurging — they can discharge that,” he said. “Student loans should really be the one type of debt they do discharge because it’s done to further an education and career. But somehow getting [my daughter] an education has encumbered me for the rest of my life.”

Similar financial nightmares are haunting other grieving families.

Angela Smith, a mother from Chesapeake, Va., filed a petition on Change.org several years ago asking private loan provider First Marblehead Corp. to forgive the $40,000 in student loans that her husband had co-signed for their son Donte, who was shot to death in 2008.

“Shortly after Donte died, that’s when the collection calls started. It was like a punch in the gut — we didn’t know what hit us,” Smith wrote in the petition. “All of a sudden we not only had to deal with the police and attorneys investigating his murder, but we also had to deal with collectors constantly calling and reminding us of our son’s death in the worst way.”

The petition received more than 150,000 signatures from sympathizers but no action from the lenders. First Marblehead didn’t respond to a request for comment, and Smith says the loan was recently sold to another company.

At least four other petitions from families in this situation have been started on Change.org. There’s been one success story so far, where the brother of a deceased borrower petitioned a bank to stop going after his grieving father for payments, and the loan was forgiven.

Legislation aiming to help people in these situations, including recent bills that would allow student loan debt to be discharged in bankruptcy, have been introduced over the years but have yet to pass in Congress.

For now, the only option parents really have is to propose a payment plan with the lender or try to prove undue financial hardship to the courts in order to get the debts discharged in bankruptcy — which is rarely approved, said Loonin. And for anyone not already in this terrible situation, be very wary of taking out private loans — always try to get as much federal aid as possible first.

As he approaches 60, Mason’s dreams of retirement have been shattered. He’s done the math, and he will have dependent children living under his roof until he is almost 70 years old. He hasn’t taken a vacation with his wife since his daughter died, and doesn’t realistically see that happening for many years to come.

“We’ve pretty much gone through our retirement [funds] already — we didn’t have a lot saved to begin with and now any extra money goes to the kids, as it should, and then whatever we can pay on the loans, we do,” said Mason. “At my stage of life, I should have a very different lifestyle than I do.”

22 comments

NobodyAtAll

Wulfe

I feel sympathy for them, and hope the programs can provide a reasonable payment plan, but I am not apt for forgiving the loans altogether. Unfortunately, that is the risk you take by co-signing a loan. That’s a very big loan too, $100K? Maybe shouldn’t take out that much, or co-sign if they couldn’t pay it back, what if she just decided to run off? In the end, maybe if you do co-sign a loan for someone like this, child, parent, sibling, a life insurance policy would also be smart. I know it sounds morbid, and again I feel sympathy, the banks should work out a payment plan that works for both, but you also have to be realistic.

Why should people who go out and spend money they don’t have, on stupid things they really don’t need be allowed to claim a bankruptcy on their loans to get out of it, but not in this situation. Maybe at the time he co signed they knew daughter would be paying it off. Unfortunately life isn’t predictable and the poor young woman died leaving this. If those people who can just go spend without thinking and rack up debt can get out of it, then so should he be able to.

corndog

Cosigning of a loan of that magnatude is not smart, even for one of your kids…..And if you do, it should have a term life insurance policy parallel to it…..morbid maybe, necessary absolutely…..plus, with 3 young children, it is absolutely irresponsible not to have life insurance to begin with, especially for a single parent……..plus if father(s) is/are still alive, he should be paying child support for those children

6%

Alot of info not being told her except the fact that a terrible tragedy happened and she died. Where is the father of fathers of her kids? Did she not have some kind of insurance knowing she had small children? Alot to be figured out instead of people saying they should not be held responsible for it.

I hate it but I have to agree with the rest of the people on here. First off, where was she going to school at, Harvard? A bachelor in Nursing is not that much even at some private colleges. Secondly, why as a single mother of three kids didn’t she have life insurance? I, myself have over half a million in coverage in case that I die and I am only 30. That is in hopes it covers my wife and 3 small kids.

Doc Bennett

Chucky

It does sound cold and I sympathize with the family for their loss but I agree with most of the comments here. They cosigned for the loan so I think it should be paid back. Now I could see stopping fees and penalties under those circumstances and maybe reducing the interest rate to the actual cost of the loan. In fact, after reading the article, I don’t think they should forgive the federal loans either. It is a risk to take out a loan. With a car or house a lender has the potential to get at least part of that money back. There is no collateral with a student loan and everyone is assuming that the student will graduate and that they will be able to pay it back. Clearly, that is not always the case. Maybe an insurance policy on the loan similar to unemployment insurance on a car loan would have prevented this kind of thing from happening. Is that type of insurance available on student loans?

benne032

Amanda

This is really sad no one ever thinks of someone ding that young while in school. When your a single young mother like me you are doing the best you cant on nothing. IM going to school to better my children lives but if something happen to me my family will take my 3 children but that doesnt mean they should have to pay everything I owed. Everyone is talking about the fathers and alot of men are like the old fashion day men up and take care of house and home. My childrens dads arent able to help me so if something happen it would still be my family taking all care for my children ya you can apply for child support but just because you do doesnt mean you will get it Ive went through it for 11 years my son father had a good job cars house and all when we met then lost it all and has worked under the table the time he was able to work then became disable and cant work so no child support for my son ever. And child support doesnt really look into the fathers lives it should be changed if they work under the table they should still be made to paid enough to matter. Its not right most moms are stuggling to take care of their children while the fathers are out living a nice life with no worries and working under the table making good money.

Imaslutalso

Donna

I sympathize on your loss but I also agree with a lot of the people here, these companies deserve to be paid back. Also, my husband and I are raising 3 children comfortably on less than $75,000 a year and why is the father or fathers of the children not helping support them?

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